News: Higher and Enhanced: Good News For HDB And EC buyers?

Sep 20, 2019

The new housing measures are expected to make public housing more affordable and accessible for Singaporeans, but will they impact the HDB and EC market?

By contributor

Recent measures rolled out by the government, which include enhanced CPF housing grants of up to $80,000 and revised income ceilings of $14,000 for HDB flats and $16,000 for executive condominiums (ECs), are expected to breathe new life into Singapore’s public housing market, but some analysts are not expecting a huge influx of HDB resale and EC buyers.

Instead, those who fall under the higher income bracket with a monthly household income of over $12,000 are more likely to consider private resale condominiums or new launches as overall prices have dropped, noted Tan Tee Khoon, Country Manager at PropertyGuru.

“Prices of new ECs have also been inching upwards, with recent EC launches averaging around $1,100 psf,” said Tan, adding that EC grants haven’t been raised.

Tan believes that there won’t be a huge influx of HDB and EC buyers. As the prices for new and resale condominiums have dropped, higher-income buyers will likely consider them over HDBs and ECs.

Khalil Adis, Founder at Khalil Adis Consultancy, thinks while this is possible, it would also depend on the financial situation of buyers.

He said: “A condominium will require a significant cash outlay of five per cent for the option to purchase and a further 15 per cent in cash or CPF upon signing the sale and purchase agreement. You also need to set aside a further five per cent as the maximum loan you can get is 75 per cent. There is also the buyer’s stamp duty at four per cent of the purchase price.

“As the cash component is quite significant, those who are financially stretched should look to buy a BTO flat, resale HDB, or an EC instead.”

Public housing limitations

But there are other factors that could deter prospective buyers, such as existing ownership restrictions in the public housing market, the lower supply of EC units, and rules on CPF funds to buy older HDB flats.

Adis pointed out that buyers of HDB flats and ECs must fulfil the five-year minimum occupation period (MOP) before they can rent out or sell their properties. There is no MOP for private condos.

PropertyGuru’s Tan highlighted that EC owners can only sell their units to Singapore citizens and permanent residents after the MOP. “Only after 10 years does the EC become free of such restrictions, and homeowners are free to sell their EC to anyone,” he said.

Meanwhile, Piermont Grand in Punggol is likely to be the only EC launch this year, and Adis feels the lower supply of EC units would mean fewer choices for buyers.

At the end of Q2 2019, there were 3,022 EC units in the supply pipeline, compared to a total supply of 50,674 uncompleted private residential units, said Adis.

Changes to CPF, loan rules

Meanwhile, Tan pointed to recently relaxed rules on CPF use and HDB loans for purchasing older flats, whereby buyers can take an HDB housing loan of up to the full 90 per cent Loan-to-Value limit if the remaining lease of the flat covers the youngest buyer to the age of 95. This is even if the flat has less than 60 years left on its lease.

He explained that some buyers may be worse off if they buy a unit with less than 60 years left on the lease, but the loan does not cover them to age 95.

“In this instance, the amount of CPF funds they can use will be pro-rated under the new laws which they wouldn’t have faced previously,” he said.

But Adis believes this policy may help to reinvigorate the HDB resale market which has been plagued by uncertainties concerning older HDB flats with less than 30 to 40 years left on the lease.

“This, together with the Enhanced CPF Housing Grant, may sway buyers to make a purchase in a mature estate, especially among those who want to live close to their parents. Still, buyers will look at the overall desirability of the area such as proximity to MRT stations, nearby amenities, and their financial situation before deciding to take the plunge to buy either a BTO or resale flat,” he said.

“The new policy is meant to ease the entry for first-time home buyers when purchasing from the HDB market. It is also a pro-family policy that is meant to help them plan a family.”

While the new housing measures are expected to make public housing more affordable and accessible for Singaporeans, they are unlikely to have a big impact on the HDB and EC market as buyers with significant cash savings will likely purchase private condos as the market has stabilised and there are no MOP restrictions.

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